Green tax burden could see cement firms quit the UK

Environmental taxes are threatening to drive Britain’s cement producers abroad, a leading think tank has warned.

According to research from Civitas, the UK is undermining its domestic industry even though it is one of the world’s most environmentally sensitive and efficient.

Emissions trading, industryfinanced subsidies to the renewable energy sector and the Climate Change Levy are making it harder for UK-based cement producers to compete with rivals in countries that do not have equally exacting environmental regimes.

Companies are increasingly sourcing their cement from countries such as Turkey, Civitas claims, where lower environmental standards make it cheaper to produce. Shipping costs are relatively cheap compared to the energy required to produce cement.

Britain has already gone from being a net exporter to a net importer of cement. Civitas fears that similar oversight of the effect regulations and taxes can have on competitiveness will undermine other manufacturing industries with potentially damaging consequences for the economy. According to the Office for National Statistics, Britain’s manufacturing industry is taking longer to climb out of the recession than any other. Production is still 10 percentage points below the pre-recession high, though research from Deloitte out today shows that confidence is recovering as the number of business failures is falling.

David Merlin-Jones, research fellow at Civitas, said: "For the UK, the crucial issue is the extra costs Britain imposes on its manufacturers that other EU countries do not. Each of these may be small in themselves, but in total they are undermining British competitiveness.

"It’s a classic case of the straw that broke the camel’s back.

"In the case of the cement industry, three of the four biggest companies are foreignowned so it won’t take much more to push them away from British production."

The three foreign-owned cement companies have mothballed or shut down plants in the recession, reducing UK production by more than the fall in demand. As a result, cement imports have risen - increasing the trade deficit by £2m. In total the UK is importing £87m of cement annually to supplement domestic production.

According to Civitas, the rise in imports has occurred despite the British method having "a minor cost and pollution minimising advantage". Cement is an energy intensive industry. As a result, it is excluded from the EU’s taxation of energy products directive, but the UK does not exclude it from the Climate Change Levy, albeit charged at a 35pc rate. Cement producers are also paying a large share of the £1.3bn renewable subsidies levy, imposed on business regardless of how energy intensive they are.

The Mineral Products Association fears that the next phase of Europe’s emissions trading scheme in 2012 will be so expensive it will make cement production in the UK "impossible".